Stankovic v Hockey

1. [1]

   HIS HONOUR: Michael Stankovic sues Charles Hockey for professional negligence. Mr Hockey is Mr Stankovic’s former solicitor. He alleges that Mr Hockey was negligent and breached his retainer in several specified respects when acting for him in proceedings in the Federal Magistrates Court following sequestration of Mr Stankovic’s estate. Mr Stankovic alleges that Mr Hockey’s defaults caused him loss and damage said to amount to $35M.

2. [2]

   For the reasons that follow, I consider that Mr Stankovic’s claims are entirely without foundation and should be dismissed with costs.

Background

1. [3]

   Prior to the sequestration of his estate in bankruptcy, Mr Stankovic was together with his former wife the registered proprietor of land in Kellyville in the Hills Shire. The Baulkham Hills Shire Council commenced proceedings against Mr Stankovic and his former wife in the Land and Environment Court seeking orders that the property be cleaned up and that they cease keeping pigs. Several judgments in those proceedings were published between 2005 and 2010. Although he contests the validity of the order that was made against him and the circumstances in which it was made, Mr Stankovic became indebted to the Council in respect of legal costs incurred in those proceedings. This is necessarily referred to below in more detail.

2. [4]

   On 26 May 2008, the Council filed a creditor’s petition in the Federal Magistrates Court, presumably based upon a failure by Mr Stankovic to comply with a bankruptcy notice demanding payment of the costs in question. On 28 April 2008, Kent Attorneys filed a notice of appearance as a supporting creditor in those proceedings. Kent Attorneys claimed approximately $240,000 in professional costs for acting for Mr Stankovic in the Land and Environment Court in his long running dispute with the Council. A sequestration order was made against Mr Stankovic on 12 May 2009, but despite the terms of s 37 of the Bankruptcy Act 1966, the proceedings were somehow stayed for 21 days until 2 June 2009. Messrs Van Der Velde and Cronan were in due course appointed as Mr Stankovic’s bankruptcy trustees. The precise terms of the orders made by Federal Magistrate Raphael on 12 May 2009 were as follows:

3. [5]

   On 20 May 2009, Mr Stankovic commenced separate proceedings in the Federal Magistrates Court by way of application seeking an annulment of his bankruptcy. Federal Magistrate Barnes made orders in both proceedings on 29 May 2009. Both the creditor’s petition and the annulment proceedings were listed for 2 June 2009. That date was 21 days from the date of the sequestration order and corresponded with the last day of the stay ordered by Federal Magistrate Raphael.

4. [6]

   On that day, Mr Hockey appeared before Registrar Hedge apparently on behalf of Mr Stankovic. Mr Stankovic maintains that he had not even met Mr Hockey at that stage and that Mr Hockey accordingly had no instructions from him either to appear or to consent to the making of orders of any sort. In the events that occurred the Registrar made the following orders in the creditor’s petition:

5. [7]

   Mr K Gourlie appeared on that occasion for the Council. Mr T Orlizki appeared for Kent Attorneys as a substitute creditor. Each signed the general short minutes of order that contained these two orders. Mr Hockey signed them as the solicitor appearing for Mr Stankovic.

6. [8]

   The annulment proceedings commenced by Mr Stankovic on 20 May 2009 came back before the Federal Magistrates Court on 28 July 2009. Mr Stankovic had attempted without success in the meantime to raise a loan to pay his creditors. The proceedings were on that occasion adjourned to 8 September 2009 when they were further adjourned to 13 October 2009. On that day Mr Hockey appeared for Mr Stankovic. Mr Stankovic does not dispute that on this occasion Mr Hockey did so with instructions from him. The court ordered that Mr Stankovic’s annulment application should be dismissed. Mr Stankovic makes no complaint in these proceedings about what occurred on that day.

7. [9]

   Mr Stankovic alleges in these proceedings that Mr Hockey acted on 1 and 2 June 2009 without instructions from him and that the dismissal of his oral application for an annulment was correspondingly arranged or consented to by Mr Hockey entirely without authorisation of any kind. Mr Stankovic alleges that Mr Hockey was therefore negligent and breached his duty of care to Mr Stankovic in a number of specified respects. He alleges that he sustained significant losses as a consequence.

8. [10]

   Mr Stankovic has appeared without a lawyer in these proceedings although his pleadings reflect the likelihood that he had some professional assistance at one time. The relevant document is the fourth amended statement of claim filed on 6 March 2015. It is for presently relevant purposes in the following terms:

9. [11]

   Mr Stankovic’s particulars of negligence and breach of duty assert that Mr Hockey failed in generic respects to heed his concerns or report regularly to him. Somewhat curiously, none of the specified particulars asserts that Mr Hockey acted without instructions on 1 or 2 June 2009. Mr Stankovic does, however, allege that Mr Hockey should in effect have realised, or investigated the possibility, that the proceedings in the Land and Environment Court had been dismissed by Lloyd J and that their reinstatement at a later time by a different judge was invalid. That is important from Mr Stankovic’s position because the costs order upon which the Council relied in its bankruptcy notice, and which supported the making of the sequestration order, was made in the Land and Environment Court proceedings after their dismissal by Lloyd J. Mr Stankovic has consistently and repetitively asserted that his bankruptcy was invalid as a result. (This approach by Mr Stankovic somewhat stubbornly continues to ignore the fact, as explained by Pain J on 14 March 2005, that even though the proceedings had earlier been dismissed by Lloyd J on 16 February 2005 for want of prosecution, the Council was entitled to have them reinstated under the Land and Environment Court Rules 1996 Pt 15 rules 3 and 9, and that a timely application by the Council to do so had been made.)

10. [12]

    Before proceeding further, it becomes important to understand Mr Hockey’s version of what occurred with respect to the events of 1 and 2 June 2009 and up to at least 13 October 2009. In this respect I observe that although Mr Hockey served an affidavit upon Mr Stankovic sworn 1 September 2015, it was not read. This is in large part because Mr Stankovic somewhat incautiously took the step of calling Mr Hockey in his own case. Mr Lloyd of counsel for Mr Hockey was therefore able, in ways about which I cautioned Mr Stankovic beforehand, to cross-examine his client and to elicit the material to which Mr Hockey had previously deposed.

11. [13]

    Mr Hockey said that Mr Stankovic attended his office on the morning of 1 June 2009. He came with Wayne Lawrence, who was Mr Hockey’s former client. According to Mr Hockey, Mr Stankovic told him that he had been made bankrupt and that he wanted the bankruptcy annulled. Mr Hockey said that he attended the Federal Court on the afternoon of 1 June 2009 and filed an appearance. Mr Stankovic came back the following day and they walked to court together.

12. [14]

    Mr Hockey said that he was later advised by the legal representatives of the Council, in Mr Stankovic’s presence, that it was owed about $30,000 in rates in addition to the costs claimed in the bankruptcy notice. The representative of Kent Attorneys also advised Mr Hockey that it proposed to be substituted as the creditor as it was owed approximately $240,000 in legal fees incurred when previously acting for Mr Stankovic. Mr Hockey then proceeded to tell Mr Stankovic that he could not get an annulment because he still owed money to the Council and Kent Attorneys who would not agree to an annulment unless they were paid.

13. [15]

    Mr Hockey said that prior to going to court on 2 June 2009, he did not know that Mr Stankovic had applied to annul his bankruptcy. He learned about the details of this from Mr Stankovic at court on that day. Mr Hockey said that he advised Mr Stankovic that he should consent to his oral application to annul the bankruptcy made in the creditor’s petition being dismissed and to stand over his formal annulment application for a month. Mr Hockey said that Mr Stankovic agreed to that proposal.

14. [16]

    That is what occurred. The other parties agreed to orders proposed by Mr Hockey. These were reduced to short minutes of order, which Mr Hockey said were shown to Mr Stankovic beforehand.

15. [17]

    Following this court appearance, Mr Hockey and Mr Stankovic returned to Mr Hockey’s office. Mr Hockey advised Mr Stankovic that he should go to the trustees’ office and complete a statement of affairs. Mr Stankovic did this shortly afterwards. His statement of affairs is referred to below in more detail.

16. [18]

    On or about 12 October 2009, which was the day before the annulment proceedings were due back in court, Mr Hockey spoke to Mr Stankovic and informed him that the court would not be inclined to grant him any further adjournments unless he could demonstrate a capacity to discharge any outstanding obligations to his creditors. Legal costs were also mounting unnecessarily and to no good effect if some prospect of paying all his debts could not be identified. Mr Hockey said he told Mr Stankovic that he should agree to have his annulment proceedings dismissed and that he could make another application later once he was able to borrow sufficient funds to pay his creditors and his wife agreed to sign a mortgage for that purpose. Mr Hockey said that Mr Stankovic agreed to that course.

17. [19]

    When the annulment proceedings came back to the Court on 13 October 2009, Mr Hockey appeared for Mr Stankovic and withdrew his application.

18. [20]

    On or about 18 October 2009, Mr Stankovic instructed Mr Hockey to represent him in the Family Court. In that context Mr Hockey settled Mr Stankovic’s affidavits in chief and in reply to his wife’s affidavit. He also appeared on numerous occasions before Justice Watts.

19. [21]

    Some time prior to 18 March 2010, Mr Stankovic contacted Mr Hockey in order to discuss his continuing retainer. At his office on 18 March 2010, Mr Hockey told Mr Stankovic that if he wanted him to continue to act for him in the Family Court proceedings he would have to sign an authority before Mr Hockey could brief a barrister to appear. Mr Hockey said that Mr Stankovic took some documents and left.

20. [22]

    Mr Stankovic subsequently filed an application without reference to Mr Hockey in the Family Court seeking an order that his former wife be required to sign a mortgage over their Kellyville property. Shortly after 29 March 2010, Mr Stankovic arrived unannounced at Mr Hockey’s office. Mr Hockey advised Mr Stankovic that he should not have filed that application without discussing it with him first. After a discussion about the fact that Mr Stankovic had not by then been able to arrange for any finance to pay creditors, or a mortgage to present to his wife to sign, Mr Hockey informed Mr Stankovic that he could no longer act for him.

21. [23]

    According to Mr Hockey, Mr Stankovic became agitated and was escorted from the premises. Mr Hockey ceased thereafter to act for him in any capacity.

Findings

1. [24]

   For a number of reasons to which I will shortly refer, Mr Stankovic’s claim is wholly misconceived. However, in the way of things, it is a fundamental part of Mr Stankovic’s case that he never instructed Mr Hockey to act or to appear for him at any time before 3 June 2009 at the earliest and that all of his subsequent difficulties are the result of what Mr Hockey did on 1 and 2 June 2009. Even though at one level this dispute gives rise to a false issue, or at least an issue of minor significance, it has clearly preoccupied Mr Stankovic, almost to the point of obsession. It therefore requires resolution by me.

2. [25]

   In my opinion, Mr Hockey was instructed by Mr Stankovic on 1 June 2009. There are a number of things that lead me to this conclusion.

3. [26]

   First, it seems to me to be inconceivable that Mr Hockey would, or somehow could, have attended the Federal Court registry to file an appearance for a client he had never met, with respect to proceedings in which he had no interest, and (presumably) for no fee. It is a necessary element of Mr Stankovic’s complaints that that is precisely what occurred, and yet he offers no plausible explanation of how or why such an extraordinary thing might have taken place. Both Mr Hockey and Mr Stankovic agree that they had never met before 1 June 2009 and were strangers both professionally and in every other sense. I am not prepared to accept that Mr Hockey in effect turned up out of nowhere to hijack Mr Stankovic’s interests in the Federal Magistrates Court litigation against him. Lest there be any doubt about it, I entirely accept Mr Hockey’s evidence about what occurred. I reject Mr Stankovic’s evidence to the contrary. I do not accept that Mr Stankovic is merely mistaken in his recollections but find that he was actively attempting to mislead me by knowingly giving false evidence about this.

4. [27]

   Secondly, Mr Stankovic executed a costs agreement with Mr Hockey covering the performance of legal work in the Federal Magistrates Court. That document is dated 1 June 2009. Mr Stankovic does not appear to deny that his signature is on the document. It is witnessed by Mr Hockey. The agreement defines the work anticipated to be performed by Mr Hockey as the bankruptcy proceedings between Mr Stankovic and the Baulkham Hills Shire Council, including advising generally and appearing on an annulment application, and liaising with the trustee.

5. [28]

   Mr Stankovic was asked questions about the costs agreement and how and when his signature came to be inscribed upon it. His evidence about that is as follows:

6. [29]

   That evidence does not assist Mr Stankovic who has in my view dishonestly resorted to the sanctuary of an imperfect recollection. It is difficult to reconcile his adamant and unqualified statements that he never met Mr Hockey on 1 June 2009 with the plain terms of the costs agreement that he accepts he executed and which bears that date. I find that Mr Stankovic executed the costs agreement in Mr Hockey’s office on 1 June 2009 in Mr Hockey’s presence. Mr Hockey gave evidence that that is what occurred and I accept it without qualification. I reject any suggestion by Mr Stankovic that Mr Hockey is lying about what occurred.

7. [30]

   Thirdly, Mr Stankovic swore an affidavit in proceedings between him and The Hills Shire Council on 3 December 2012 that contained the following depositions:

8. [31]

   Mr Stankovic was cross-examined about this inconsistency as follows:

9. [32]

   Mr Stankovic contended that the affidavit in question was prepared by a solicitor in Melbourne and that the matters referred to in the quoted paragraphs were, in essence, included without his instructions or knowledge. Mr Stankovic maintained that the documents that became exhibit “A” were the probable source of the information included in the affidavit by the solicitor.

10. [33]

    There are at least three problems with that. The first is that the documents contain no reference to whether Mr Stankovic was or was not present at court on any particular occasion. The source of that information could only have been Mr Stankovic. The second is that I have found that Mr Stankovic was present at court on 2 June 2009 so any assertion anywhere to the contrary is likely to have come directly from him in support of his claim that Mr Hockey acted without instructions. The third is that Mr Stankovic swore to the truth of the matters in these paragraphs in any event and has not in my view satisfactorily explained why I should not treat his present evidence about how the affidavit came to contain this material as a lie.

11. [34]

    Finally, Mr Hockey gave evidence that Mr Stankovic came to see him on 1 June 2009 with Wayne Lawrence. Mr Hockey deposed to that in his 1 September 2015 affidavit that was forwarded to Mr Stankovic under cover of Kennedys’ letter dated 2 September 2015. At least from as early as September 2015, therefore, Mr Stankovic was or should have been aware that Mr Hockey asserted that Mr Lawrence was someone who could confirm what Mr Hockey said had occurred. Mr Stankovic agreed before me that he had Mr Lawrence’s contact details, had in fact spoken to him on the phone during the course of the hearing, and by implication could have called him to give evidence in his case.

12. [35]

    I raised with Mr Stankovic the question of why in the circumstances I should not infer from his failure to call Mr Lawrence that nothing he could have said would have assisted Mr Stankovic. Having regard to the fact that Mr Stankovic is unrepresented, it is arguable that his response to this inquiry should not be given too much significance. On the other hand, Mr Stankovic is unfortunately no stranger to litigation and in the normal course of events would in my opinion have been alive to the fact that Mr Lawrence could have contradicted Mr Hockey if what Mr Stankovic said was true. I am therefore considerably troubled that Mr Lawrence’s absence does give rise to the inference in question.

13. [36]

    It seems also to be clear that Mr Lawrence was relevantly in Mr Stankovic’s camp in the way that concept is understood in this context. For example, Mr Stankovic mentioned him in the following evidence:

14. [37]

    Mr Lawrence would appear to have been a former client of Mr Hockey. Even on Mr Stankovic’s evidence, however, Mr Lawrence came to be helping Mr Stankovic, including going to court with him, before both Mr Stankovic and Mr Hockey say they had met. It seems evident in these circumstances that Mr Lawrence was someone who Mr Stankovic might reasonably have been able to secure as a witness if he had thought it would assist his case.

15. [38]

    In summary, to the extent that Mr Stankovic maintains that he had never met or instructed Mr Hockey by 1 or 2 June 2009, or that Mr Hockey acted on his own account as some kind of officious intermeddler, I reject it.

Discussion

1. [39]

   Although Mr Stankovic is clearly preoccupied with maintaining that Mr Hockey acted without reference to him, his more understandable and significant concern (at least on one view) is that the Council obtained its costs order invalidly, because the proceedings in question had been dismissed by Lloyd J and that they were not properly capable of reinstatement thereafter. This issue was considered by Foster J in his decision in Milovan Stankovic v The Hills Shire Council [2013] FCA 652. That case concerned a claim by Mr Stankovic for orders that his bankruptcy be annulled and that the Kellyville property be restored to him, or in the alternative that the respondents, who included Mr Hockey, pay him $35M in damages. Foster J summarised Mr Stankovic’s contentions in this respect at [97] as follows:

2. [40]

   Foster J dealt with Mr Stankovic’s contentions at [122] – [127] as follows:

3. [41]

   Mr Stankovic’s currently pleaded particulars of negligence against Mr Hockey include the following:

4. [42]

   The burden of Mr Stankovic’s complaint is that Mr Hockey should have in some unexplained way become aware that the costs judgment upon which the Council relied to support the issue of its bankruptcy notice was invalid or flawed so that his sequestration order could be somehow challenged or set aside. There are a number of obvious responses to these allegations.

5. [43]

   First, Mr Hockey said he was never instructed to do so. This is not surprising as by my reckoning Mr Stankovic never appears to have formulated this concern until sometime well after Mr Hockey terminated his relationship with Mr Stankovic. So much is clear from the fact that Mr Stankovic did not raise any such issue with Federal Magistrate Raphael on 12 May 2009 when the creditor’s petition came before him. Nor is there any reference to it thereafter in the Federal Magistrates Court proceedings and judgments that have been drawn to my attention.

6. [44]

   Secondly, Mr Stankovic has not given any evidence that he instructed Mr Hockey to examine this question or that he provided him with any information or instructions about what occurred in the Land and Environment Court proceedings from which it might reasonably be inferred that Mr Hockey was or should have been on notice of such a potential problem and taken steps to pursue it.

7. [45]

   Thirdly, as appears from the reasons for judgment of Federal Magistrate Barnes on 5 June 2009, Mr Stankovic had been concerned to “set aside” his bankruptcy, not upon the basis that the judgment for costs supporting the bankruptcy notice was invalid but upon the basis that he had paid the amount claimed. Nowhere in her Honour’s reasons is there anything at all suggesting or implying that Mr Stankovic was then alive to an argument that the costs judgment was vulnerable.

8. [46]

   Fourthly, even if for some reason Mr Hockey should be taken to have owed a duty of the type contended for, I can see no basis for concluding that proceedings to challenge the validity of the costs order would have produced any result that was different from the conclusions reached by Foster J. Accepting for the sake of argument that Mr Hockey breached the duty alleged, Mr Stankovic would not have been in any different position. He would not have been able to obtain an annulment of his bankruptcy or avoid the consequences of the sequestration order upon the basis that the costs judgment was invalid. Mr Hockey could not have been negligent by failing to raise or to draw Mr Stankovic’s attention to a legal argument that was without merit and doomed to fail.

Damages and causation of loss

1. [47]

   Mr Stankovic has not provided any evidence to quantify his claimed losses. I accept that he was once the registered proprietor with his former wife of a property at Kellyville that was itself valuable. It is not in dispute that the property had development potential and that it was worth many millions of dollars. It was sold on 14 September 2010 for $6.7M. It was encumbered by a mortgage of only $100,000 and there were no other creditors with a secured interest in it.

2. [48]

   The fact that this property was ultimately sold to pay creditors may on one view amount to a loss. Mr Hockey contends, however, that Mr Stankovic neither suffered any compensable loss as the result of his bankruptcy nor was any alleged loss caused by anything that Mr Hockey did or failed to do. Mr Hockey reasoned as follows.

3. [49]

   From an inspection of his statement of affairs it is apparent that Mr Stankovic owed unsecured creditors something in the order of $717,000. That included $246,000 owed to Rodney Kent for legal fees. Mr Stankovic declared that his statement of affairs was accurate on 13 July 2009.

4. [50]

   Also in his statement of affairs, Mr Stankovic declared that he was in receipt of a disability support pension and that it was his only then current source of income. Mr Hockey and Mr Lawrence would appear to have attempted to obtain finance for him to discharge his creditors. The evidence suggests that Mr Stankovic sought to raise as much as $1.5M for this purpose without success. Mr Hockey argued that in the absence of any demonstrated ability to secure finance in effect to enable Mr Stankovic to retain the property for the purposes of developing it, it was inevitable that it would be sold by his trustee on behalf of his creditors. Mr Stankovic’s difficult financial position was described in some detail in Mr Hockey’s letter to him dated 16 March 2010. Mr Stankovic did not take issue with the accuracy of the matters to which that letter refers.

5. [51]

   Mr Stankovic’s former wife was also entitled to some interest in the property. The precise extent of that interest in not disclosed on the evidence before me. There were proceedings current in the Family Court when Mr Hockey was acting for Mr Stankovic. Indeed, he was retained to represent Mr Stankovic in that litigation. Mr Stankovic would in all likelihood have had to accommodate the value of his wife’s interest in the property. The evidence does not reveal that she was willing at any stage either to sign a mortgage for the purposes of raising capital to pay off Mr Stankovic’s unsecured creditors or that she was otherwise willing to postpone receipt of her share of the proceeds of sale. The net proceeds of sale of the property were ultimately paid into a solicitor’s account by order of the Family Court pending distribution between Mr Stankovic and his former wife in accordance with orders made in that court: see Sresbodan & Sresbodan and Ors [2015] FamCA 515.

6. [52]

   Mr Stankovic’s case is that Mr Hockey had no instructions to act for him until sometime after 2 June 2009. By then the so-called stay granted by Federal Magistrate Raphael had expired. The consent orders entered into on 2 June 2009 dismissed an oral application made by Mr Stankovic, not his formal application for annulment that was not dismissed until 13 October 2009. The oral application was made on 29 May 2009 and sought either to set aside the bankruptcy notice or extend the stay granted on 12 May 2009. However, there was no legal basis for that application because there was no power to extend the stay: see Gould v Day [2002] FCA 66. To the extent that Mr Stankovic wanted to set aside the sequestration order made on 12 May 2009, the Court correctly noted on 29 May 2009 that there was no power to do so. If the consent order had not been made, or if Mr Hockey had not attended on 2 June 2009, the court would in all likelihood have made the same order. Any putative negligence by Mr Hockey in entering into that consent order without instructions or authority to do so would therefore not satisfy the “but for” causation test in s 5D(1)(a) of the Civil Liability Act 2002. It was probably inevitable that the order would have been made regardless of the conduct of Mr Hockey.

7. [53]

   Even more fundamentally, Mr Stankovic’s case is based upon a misconception about what happened on 2 June 2009. It is apparent that Mr Stankovic maintains or continues for some reason to believe that his annulment application was dismissed on that day. That is incorrect. His annulment application was not dismissed until 13 October 2009 by consent. Mr Stankovic pleads no cause of action and makes no pleaded complaint about anything done or not done by Mr Hockey on his behalf on that day. Even if he did, the dismissal of his annulment application was inevitable because he was not in a position to satisfy his unsecured creditors.

8. [54]

   The extent of Mr Stankovic’s misconception is revealed in the following passage of transcript during his cross-examination before me:

9. [55]

   It is at least apparent from that evidence that Mr Stankovic was content for Mr Hockey to proceed to have the annulment application dismissed by consent on 13 October 2009. With the minor exception of what appears in paragraph 11 of the 3 December 2012 affidavit, there is no suggestion that what occurred was not in accordance with his instructions. In any event, Mr Stankovic incurred no losses between 2 June 2009 and 13 October 2009. Any losses that he might have suffered thereafter were wholly unconnected to any possible breach of duty or negligence by Mr Hockey. It was always open to Mr Stankovic to reapply to have his bankruptcy annulled if the circumstances could have supported it. Foster J rejected just such an application in 2012.

10. [56]

    Finally, while Mr Stankovic’s current statement of claim contains a reference to legal costs, no evidence has been led to support such a claim. There is also no evidence to support a claim for any loss allegedly occasioned from work performed by Mr Hockey in the Family Court litigation.

Conclusion

1. [57]

   Mr Stankovic has clearly become irrationally preoccupied by what happened on 1 and 2 June 2009. He ascribes his present unfortunate position to those events. However, for any relevant legal purpose they are completely unconnected. Mr Stankovic has not demonstrated any breach of duty owed to him by Mr Hockey.

2. [58]

   It follows in these circumstances that the proceedings should be dismissed with costs.